|Eric Wilson, Xinja|
At a time when Australia’s biggest banks are under increasing regulatory and margin pressure – none more so than the biggest, Commonwealth Bank of Australia – he is launching a new bank with a vision to do things differently. On a chilly Sydney morning, founder Eric Wilson tells Euromoney of two influences that prompted him to go it alone and form Xinja (a name with no clear provenance that we can figure out).
One was during his career at National Australia Bank, when he became chief executive of one of the subsidiaries, National Australia Trustees. “The position of a trustee is the highest form of legal obligation you can get,” Wilson says. “We managed about A$1 billion of vulnerable people’s money, people who have been hit by a truck or had a brain injury and couldn’t manage it themselves. I spent two years making life-and-death decisions for people. I learned more than I ever had before about how important banking was.”
The other was his father-in-law, a bank manager for the Bank of New South Wales in small bush towns 40 years ago. “He told these stories about bank managers being good people, the centre of the community,” Wilson says. But he saw little resonance for either experience in the modern world of banking. “Over 20 years, my industry has not behaved well,” he says.
This realization coincided with a changing regulatory environment and the advent of digital technology through which it became possible, for the first time, to launch something new. “I was on the phone to an old friend saying I felt uncomfortable. He said: ‘Stop whingeing and start a bank.’”
So Wilson did. Helping him are three former Macquarie bankers, Verity Froud, Lindley Edwards and Craig Swanger, alongside Jason Bates, the co-founder of startup banks Starling and Monzo in the UK, and Van Le, whose field is design and innovation.
“There is a core of financial professionals around the world who are sick of having tomatoes thrown at them at barbecues,” Wilson says. “They want to do the right thing. I’m trying to build a bank that takes that ethos and brings it up to date with hyper-modern digital technology.”
Fine. But what is it and how will it be different? The idea is to create a full-service retail bank accessed purely from a mobile phone. The first product will be a pre-paid debit card, which Wilson describes as a “good standard neo-bank pathway” that also has the advantage of not requiring a banking licence, since at the time of writing Xinja does not have one. When Euromoney meets Wilson, the team is still gaining pre-registrations, with a soft release planned in October and about 5,000 cards expected in the formal launch around February.
If the Australian Prudential Regulation Authority comes through with a licence, the next step will likely be deposits and mortgages. He insists Xinja will be different from the norm, although it will not really be clear how until the launch. For now, Le is going out and talking to people for hours at a time about their problems with existing products and coming back to customer design to address them.
It will be a while before we can tell if Xinja has any substance to go with its vaulted ambitions, but it has some believers. Earlier this year it completed a Series A funding round of just under A$3 million ($2.37 million); at the time of writing, it was seeking a further A$15 million. It is refusing to take any investment from Australia’s existing banks, even through their venture capital funds. “We feel it would damage our brand enormously to do that,” says Wilson.
The right time
It is only possible to do what Wilson is doing because of changes in regulation that are coming through at exactly the right time for him. Historically, to get a full banking licence in Australia an institution needs A$50 million of capital. “That’s a pretty impossible conversation for a startup,” he says. “I got laughed out of many swanky offices in the CBD [central business district] when I said: ‘Give me A$50 million, I’m going to stick it in the bank and do nothing with it’.
“That’s a short conversation.” However, the system is changing after the Federal budget in May. Wilson expects a model to evolve where Xinja will be given a restricted banking licence – for example, no deposits greater than A$10,000 per person – requiring a more modest amount of capital than a full licence. Gradually the permissions of the licence would be cranked up as the bank proves itself.
Wilson calls it “a tiered P-plate licence,” a reference to the interim licence new drivers hold for several years in Australia before graduating to a full one. This might take up to two years. “The reality is, it’s difficult to get a banking licence in this country,” Wilson says. “And as a banker, I am completely comfortable with that.”